Random Thoughts: The Third Dip Cometh!
The bulls and bears battle in historic fashion.
It's been 113 years since the Dow Jones Industrial Average (INDEXDJX:.DJI) has gone this long without a three-day decline, according to the sharply dressed and highly cerebral Jeff Cooper.
113 years is nothing to sneeze at; we can do a lot in 113 years, if we ever had that opportunity. That streak, however, will come to an end today IF the DJIA finishes to the downside, following the slippage of the last two days.
Here and now, S&P (INDEXSP:.INX) 1634 is the level to watch; not only was that yesterday's low, but it will provide "gap fillage" from the hot-popper two Tuesdays ago. Broadening the aperture a bit, the false breakout above the trend-channel will bring us back to playing, playing in the band, with support at S&P 1600.
I may be wrong - or, I have been wrong as of late - but we spoke about S&P 1600 as a first step to a potential move to S&P 1500 yesterday. That may or may not happen - time will tell, and my crystal ball is in the shop - which is why we take our trading journey one stair-step at a time in an effort to manage risk (rather than chase reward) and employ discipline over conviction as we together find our way.
S&P 1634 and S&P 1600 are levels on the downside while S&P 1655 (yesterday's high) will violate the emerging pattern of "lower highs" (a sign of distribution), if and when, the other way. Both charts can be found below.
Yesterday, following a 7% haircut in Japan, stateside stocks put on a brave face. The price action, in my view and with 23 years under my belt, could be summed up in one word: fascinating.
The question remains whether, through a different lens, it might qualify as "denial," or the first in the psychological continuum of "denial-migration-panic," which is detailed in The Three Phases of Leave.
What it did do is embolden the bulls, and while this observation isn't back-tested, I've always been wary of "back-to-back" Snappers as the first session creates hope and the second one (the next day) often destroys it.
I heard from two sources yesterday that there was "nothing for sale" (from the institutions). That is obviously subject to change, and it may very well tie into the denial vibe, but my ears are your ears.
This is consistent with The Bubble in Complacency although IF the dip shtick doesn't stick, this psychology is likely to shift.
Goldman Sachs (NYSE:GS) and Apple (NASDAQ:AAPL) are trying to provide some upside leadership, yet breadth remains 3:1 negative.
Did I mention that one of the few benefits of being the Bubble Boy (working from home during my recovery) is the M-I-C-K-E-Y time with Ruby after the market closes each day?
- Good luck and enjoy the three-day respite; you've most certainly earned it!
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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